The Supreme Court on Thursday declared as unconstitutional the National Tax Tribunal Act under which a national tribunal was set up to decide tax-related cases by taking away the jurisdiction of High Courts in such matters.
A five-judge Constitution Bench comprising Chief Justice of India R.M. Lodha and Justices J.S. Khehar, J. Chelameswar, A.K. Sikri and Rohinton Nariman held that it was the ultimate encroachment on the exclusive domain of the superior Courts of Record in India.
The Bench passed the order on a batch of petitions filed by the Madras Bar Association and others challenging the validity of the National Tax Tribunal, contending that there was a grave danger that the judiciary would be substituted by a host of quasi-judicial tribunals which function as departments of various ministries.
Writing the main judgment, Justice Khehar said Parliament had the power to enact legislation and to vest adjudicatory functions, earlier vested in the High Court, with an alternative court/tribunal. Exercise of such power by Parliament would not per se violate the basic structure of the Constitution. “The basic structure of the Constitution will stand violated if, while enacting legislation pertaining to transfer of judicial power, Parliament does not ensure that the newly created court/tribunal conforms with the salient characteristics and standards of the court sought to be substituted. The National Tax Tribunal encroaches upon the power of higher judiciary, which only can decide issues involving substantial laws and not a tribunal.”
Justice Nariman wrote a separate but concurring judgment.
The Bench said: “It is obvious that substantial questions of law which relate to taxation would also involve many areas of civil and criminal law, for example Hindu joint family Law, partnership, sale of goods, contracts, Mohammedan Law, Company Law, law relating to Trusts and societies, transfer of property, law relating to intellectual property, interpretation of statutes and Sections dealing with prosecution for offences. It is therefore not correct to say that taxation, being a specialised subject, can be dealt with by a tribunal.
“All substantial questions of law have, under our constitutional scheme, to be decided by the superior courts alone. Indeed, one of the objects for enacting the National Tax Tribunals Act, as stated by the Minister on the floor of the House, is that the National Tax Tribunal can lay down the law for the whole of India which then would bind all other authorities and tribunals. This is a direct encroachment on the high courts’ power under Article 227 to decide substantial questions of law which would bind all tribunals.”